Nearly $1 Billion In Taxes Levied On Contractors In Afghanistan

The U.S. government's leading oversight authority on Afghanistan reconstruction says the Afghan government has levied nearly $1 billion in "illegitimate" taxes on contractors working on U.S.-funded reconstruction projects in the war-torn country.

In a report issued on May 14, the Special Inspector General for Afghanistan Reconstruction (SIGAR) said a recent audit found that the Afghan Ministry of Finance had levied $921 million since 2008 in business taxes and associated penalties on 43 contractors.

"That is just a small sample. So the fact that we are nearing almost a billion dollars on just 43 contractors is troubling in and of itself," Elizabeth Field Singer, Assistant Inspector General of Audits and Inspections at SIGAR, told RFE/RL's Radio Free Afghanistan.

According to Singer, taxes were also levied on contractors that both the U.S. and Afghan government agreed should be exempted.

"U.S. government agencies, including the Department of Defense, and USAID [the United States Agency for International Development], and a bureau in the State Department have negotiated bilateral agreements with the Afghan government exempting contractors from certain taxes," she said. "So what is worrisome to us is, that despite those agreements the Afghan Ministry of Finance has continued to pursue taxing contractors in contravention of these agreements."

According to the report, the Afghan government and contractors are locked in a dispute over the taxes and the exempt status of subcontractors, with a number of companies refusing to pay.

It says the contractors who agreed to pay the taxes later received reimbursement from the U.S. government for the improper fees.

Singer told RFE/RL that the situation was affecting U.S. reconstruction efforts in Afghanistan.

"We found a number of problems where these taxes can hinder operations, for example companies have shipments that they are trying to import into the country that are withheld at the borders so they are not able to get shipments that they need in," she said. "We found in some cases that contractors were intimidated, their freedom of movement was restricted, and, in fact, in some cases contractor personnel were in fact arrested."

In a statement, Special Inspector General John Sopko said it was "disturbing" that U.S. agencies let this happen at the expense of U.S. taxpayers.